Heterogenous wage formation under a common monetary policy
AbstractHow does a monetary union work when labour markets are heterogeneous? Since shocks are transmitted via both trade links and the common monetary policy and propagated via labour market responses, it follows that labour market institutions may have not only national but also union-wide implications. These issues are analysed in an intertemporal general equilibrium model for a currency union in which labour markets are heterogenous and where the monetary policy targets expected inflation. More flexibility in adjustment means more stable aggregate output, but inflation control becomes more difficult. Heterogeneity in adjustment plays a large role, in particular if country sizes are also asymmetric. This also holds in the case of aggregate shocks, and heterogeneity is potentially of large importance for aggregate volatility when countries are of asymmetric size. Considering the effects on country specific output variability, it is seen that there are important spill-over effects between labour market structures, and it is not necessarily beneficial to take a unilateral move to make labour markets more flexible.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 25 (2008)
Issue (Month): 4 (July)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30411
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Torben M. Andersen, 2004. "Real and Nominal PropAgation of Nominal Shocks," Economic Journal, Royal Economic Society, vol. 114(492), pages 174-195, 01.
- Sergio Rebelo, 2005.
"Real Business Cycle Models: Past, Present and Future,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 107(2), pages 217-238, 06.
- S. Rebelo., 2010. "Real Business Cycle Models: Past, Present, and Future," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 10.
- Rebelo, Sérgio, 2005. "Real Business Cycle Models: Past, Present and Future," CEPR Discussion Papers 5384, C.E.P.R. Discussion Papers.
- Sergio Rebelo, 2005. "Real Business Cycle Models: Past, Present and Future," RCER Working Papers 522, University of Rochester - Center for Economic Research (RCER).
- Sergio Rebelo, 2005. "Real Business Cycle Models: Past, Present, and Future," NBER Working Papers 11401, National Bureau of Economic Research, Inc.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991.
"Unemployment: Macroeconomic Performance and the Labour Market,"
Oxford University Press, number 9780198284345.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
- Harris Dellas & George Tavlas, 2004.
"Wage Rigidity and Monetary Union,"
12, Bank of Greece.
- Eric Thode & Norbert Berthold & Rainer Fehn, 1999. "Real Wage Rigidities, Fiscal Policy, and the Stability of EMU in the Transition Phase," IMF Working Papers 99/83, International Monetary Fund.
- Nicola Brandt & Jean-Marc Burniaux & Romain Duval, 2005. "Assessing the OECD Jobs Strategy: Past Developments and Reforms," OECD Economics Department Working Papers 429, OECD Publishing.
- Giancarlo Corsetti & Paolo Pesenti, 1997.
"Welfare and Macroeconomic Interdependence,"
NBER Working Papers
6307, National Bureau of Economic Research, Inc.
- Spange, Morten, .
"International Spill-over Effects of Labour Market Rigidities,"
Economics Working Papers
2003-12, School of Economics and Management, University of Aarhus.
- Spange, Morten, 2008. "International spill-over effects of labour market rigidities," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 157-178, March.
- Maritta Paloviita, 2006.
"Inflation Dynamics in the Euro Area and the Role of Expectations,"
Springer, vol. 31(4), pages 847-860, November.
- Paloviita , Maritta, 2002. "Inflation dynamics in the euro area and the role of expectations," Research Discussion Papers 20/2002, Bank of Finland.
- Oecd, 1998. "The OECD Jobs Strategy: Progress Report on Implementation of Country-Specific Recommendations," OECD Economics Department Working Papers 196, OECD Publishing.
- Laurence Boone & Claude Giorno & Mara Meacci & Dave Rae & Pete Richardson & Dave Turner, 2001. "Estimating the structural rate of unemployment for the OECD countries," OECD Economic Studies, OECD Publishing, vol. 2001(2), pages 171-216.
- Benigno, Pierpaolo, 2001.
"Optimal Monetary Policy in a Currency Area,"
CEPR Discussion Papers
2755, C.E.P.R. Discussion Papers.
- Duarte, Margarida & Wolman, Alexander L., 2002.
"Regional inflation in a currency union: fiscal policy vs. fundamentals,"
Working Paper Series
0180, European Central Bank.
- Margarida Duarte & Alexander L. Wolman, 2002. "Regional inflation in a currency union: fiscal policy vs. fundamentals," International Finance Discussion Papers 746, Board of Governors of the Federal Reserve System (U.S.).
- Dave Turner & Elena Seghezza, 1999. "Testing for a Common OECD Phillips Curve," OECD Economics Department Working Papers 219, OECD Publishing.
- Alfredo Omar Palafox-Roca & Francisco Venegas-martínez, 2014. "Average consumer decisions in an economy with heterogeneous subjective discount rates and risk aversion coefficients: the finite horizon case," Economics Bulletin, AccessEcon, vol. 34(2), pages 842-849.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.